WAR IS NEITHER AUTOMATIC FORCE MAJEURE NOR GROUNDS FOR FRUSTRATION OF THE CONTRACT
31 July, 2025
449
In this case, Interlegal law team represented interests of the Ukrainian company acting as the Seller in a dispute against an Estonian Buyer who had entered into a contract on supply of 6,000 metric tons of the Ukrainian corn on FOB Izmail terms.
Essence of the dispute was the Buyer’s rejection to fulfill its key contractual obligation, namely, to nominate a vessel in a timely manner within the agreed delivery period. Despite repeated written reminders from the Seller, the Buyer effectively ignored its obligations and only upon expiry of the delivery period sent a letter informing about impossibility to perform the contract, as well as offered reimbursement in a symbolic amount of 1 USD per ton, citing an alleged force majeure, namely, attacks of the russian federation on the Danube ports, followed by frustration of the contract.
The Seller reasonably rejected such an offer, emphasizing breach of contract and additional losses incurred due to the need to store the goods and their forced resale to another buyer at a lower price.
Arbitration Court completely rejected the Buyer’s argument. In particular:
Based on our legal position, the Arbitration found out that the Buyer failed to comply with the procedural order of notice on force majeure provided by GAFTA 49. No written notification was made within the prescribed period. Accordingly, Arbitration Court stated that the Buyer lost its right to refer to force majeure as a circumstance that exempts it from liability.
Arbitration Court also accepted our position regarding absence of grounds for frustration of the contract: it was not proven that the war circumstances changed essence of contractual obligations to such an extent that performance became impossible. On the contrary, martial law in Ukraine already existed at the moment of entry into the contract and was a foreseeable risk. In addition, Izmail port remained functioning throughout the entire contract period, as confirmed by the harbor master’s official data.
Finally, Arbitration Court stated that the Buyer was in default upon expiry of the contractual delivery period; therefore, the Seller was entitled on reimbursement of incurred losses.
Therefore, Arbitration Court recognized violation by the Buyer and obliged it to reimburse incurred losses.
This case once again emphasizes: the reference to war in fact does not automatically exempt from fulfillment of contractual obligations in international trade. Only proper compliance with contractual procedures, as well as timely legal assessment of the situation, can determine outcome of the dispute. Of course, professional legal support and proper evidence base are crucial for defense of the party’s rights in the framework of international arbitration.
Interlegal lawyer Larysa Roshu and junior lawyer Alina Uzun, managed by partner Oleksii Remeslo, led the case.
